Investing article: What Makes the Market Move

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What makes the stock market go up and down? You know that it is guaranteed that the market will move. But what makes it move?

The most obvious reasons that the market moves include:

Inflation
Earnings
Interest rates
Energy Prices
War
Fraud
Politics
Some events have longer lasting impressions on the stock market, while others only cause a temporary movement.

Another factor that moves the market is often unmentioned -- uncertainty. When there is the chance that something may change, the market usually reacts. In economics, uncertainty is a powerful force for investors to mitigate.

Let's look at a situation in which the market could react to an event. For example, the Federal Reserve is expected to raise interest rates by one-quarter percent at the next Open Market Committee meeting. The market absorbs and factors the rate increase into prices before the committee even meets. If the committee raises rates as anticipated, there is little responce. However, if the Fed lowers rates or increases them by one-half a percentage point, the market could react rather sharply.

Other surprising economic news, war and unexpected events can disturb the market. See, the market likes to have control. When this control is disrupted, it moves. Good news will cause a bump in prices, but bad news will send the market down.

The good news is that most of this is just temporary bumps. They will correct themselves and the market will ge back on track. If you are investing for the long term, you probably won't see much happening in your overall portfolio.

However, you still need to be aware of the factors that move market prices. When the market drops, you can often find an opportunity. If you have had your eye on a stock for a long time, but have felt the price was just a little too high, one of these events might put you in the right place to pick it up. And hopefully, when the market corrects itself, the price will go up and make you an automatic profit.

On the other hand, if you need to sell during one of the downturns, you may lose out. Watch the earnings reports, Fed meetings and other predictable events for any sign of surprise before you sell a stock. What you see in the marketplace may mean that you need to hold off a bit.

Knowing what moves the market makes you a better investor. You know what to watch for, when to buy and when to sell. Even as a long-term investor, you need to know the basics of trading. You can't just buy and forget. You still need to manage your portfolio. To do this, you need a thorough understanding of how the market works.

Once you know what moves the market, you know what to expect out of the market. You need to know how the market moves. And not just in the overall market, but the different sectors and industries can move separately and react to different events.

About the author of What Makes the Market Move

RateEmpire.com, http://www.RateEmpire.com , an internet consumer banking marketplace is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateEmpire.com also operates a financial portal #1 American Financial, found at http://www.1AmericanFinancial.com;and online shopping portal #1 Shopping Online http://www.1ShoppingOnline.com